Choice of Inventory Accounting Methods: Comparative Analyses of Alternative Hypotheses
用多元概率比方法同时检验政治成本、代理成本和生产经营差异三种假说，解释为何高通胀下许多企业仍不愿从FIFO转向LIFO存货会计方法。
In the past decade, hundreds of firms switched to the LIFO accounting method for their inventories in response to high rates of inflation. Nevertheless, many others continue to use the FIFO method. Biddle [1980] estimated that each of the 105 FIFO firms in his study paid an average of nearly $26 million in additional federal income tax. What makes these FIFO firms so reluctant to switch accounting methods? A review of the literature provides three possible explanations for inventory accounting choices: political costs, agency costs, and divergent production and investment characteristics. Because the required economic variables to test these three alternative explanations are not observable, the empirical tests are based on examination of proxy variables. Many of the proxy variables of the first and third explanations are the same, so it is difficult to discriminate one from the other using univariate statistical methods. For example, there is consistent evidence of an association between size and inventory accounting choices. But size can serve as a proxy for either political costs, or divergent production and investment opportunities, or both. Similarly, there is also strong evidence that the type of industry is associated with inventory choice, which could also be consistent with both explanations. The major purpose of this paper is to test the three explanations cited above in a simultaneous manner using multivariate probit methods.